<SUBMISSION>
<ACCESSION-NUMBER>0000950129-01-504003
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>2
<PERIOD>20010930
<FILING-DATE>20011113
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>BAKER HUGHES INC
<CIK>0000808362
<ASSIGNED-SIC>3533
<IRS-NUMBER>760207995
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-09397
<FILM-NUMBER>1785019
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>3900 ESSEX LANE
<CITY>HOUSTON
<STATE>TX
<ZIP>77027
<PHONE>7134398600
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>3900 ESSEX LAND
<CITY>HOUSTON
<STATE>TX
<ZIP>77210
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>h92238e10-q.txt
<DESCRIPTION>BAKER HUGHES INCORPORATED - SEPTEMBER 30, 2001
<TEXT>
<PAGE>



                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 2001

                                       OR

                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934




                          Commission file number 1-9397



                            BAKER HUGHES INCORPORATED
                            (a Delaware Corporation)
                                   76-0207995

                                 3900 Essex Lane
                              Houston, Texas 77027

       Registrant's telephone number, including area code: (713) 439-8600



         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes  X   No
    ---     ---

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.


Class                                            Outstanding at November 2, 2001
Common Stock, $1.00 par value per share                       335,874,634 shares



<PAGE>



                                      INDEX

<Table>
<Caption>

                                                                                                    PAGE NO.
                                                                                                    --------
<S>                                                                                                 <C>
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

         Consolidated Condensed Statements of Operations - Three months and nine months ended
         September 30, 2001 and 2000                                                                   2

         Consolidated Condensed Balance Sheets - September 30, 2001 and December 31, 2000              3

         Consolidated Condensed Statements of Cash Flows - Nine months ended
         September 30, 2001 and 2000                                                                   4

         Notes to Consolidated Condensed Financial Statements                                          5

Item 2. Management's Discussion and Analysis of Financial Condition and Results
          of Operations                                                                               11

Item 3. Quantitative and Qualitative Disclosures About Market Risk                                    18

PART II - OTHER INFORMATION                                                                           19
</Table>



                                       1
<PAGE>




                         PART I - FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS
                            BAKER HUGHES INCORPORATED
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                     (In millions, except per share amounts)
                                   (Unaudited)

<Table>
<Caption>

                                                             Three Months Ended                Nine Months Ended
                                                                September 30,                    September 30,
                                                       -----------------------------     -----------------------------
                                                            2001            2000             2001              2000
                                                       ------------     ------------     ------------     ------------
<S>                                                    <C>              <C>              <C>              <C>
Revenues                                               $    1,436.0     $    1,353.7     $    4,006.5     $    3,850.0
                                                       ------------     ------------     ------------     ------------
Costs and expenses:
  Cost of revenues                                          1,008.8          1,019.5          2,860.6          2,976.8
  Selling, general and administrative                         214.9            188.1            616.8            565.9
  Unusual charge (credit)                                      (3.4)            (1.7)             3.6            (25.4)
                                                       ------------     ------------     ------------     ------------
    Total                                                   1,220.3          1,205.9          3,481.0          3,517.3
                                                       ------------     ------------     ------------     ------------

Operating income                                              215.7            147.8            525.5            332.7
Equity in income of affiliates                                 19.6              0.6             38.9              1.9
Interest expense                                              (30.5)           (43.8)           (96.9)          (132.0)
Interest income                                                 1.1              0.9              2.9              1.9
Gain (loss) on trading securities                                --             (3.1)              --             14.1
                                                       ------------     ------------     ------------     ------------

Income before income taxes, extraordinary loss                205.9            102.4            470.4            218.6
  and cumulative effect of accounting change
Income taxes                                                  (68.8)           (37.2)          (157.7)           (75.3)
                                                       ------------     ------------     ------------     ------------

Income before extraordinary loss and cumulative               137.1             65.2            312.7            143.3
  effect of accounting change
Extraordinary loss (net of $0.8 income tax benefit)              --               --             (1.5)              --
Cumulative effect of accounting change (net of $0.5
  income tax expense)                                            --               --              0.8               --
                                                       ------------     ------------     ------------     ------------
Net income                                             $      137.1     $       65.2     $      312.0     $      143.3
                                                       ============     ============     ============     ============
Basic earnings per share:
  Income before extraordinary loss and cumulative
    effect of accounting change                        $       0.41     $       0.20     $       0.93     $       0.43
  Extraordinary loss                                             --               --               --               --
  Cumulative effect of accounting change                         --               --               --               --
                                                       ------------     ------------     ------------     ------------
  Net income                                           $       0.41     $       0.20     $       0.93     $       0.43
                                                       ============     ============     ============     ============

Diluted earnings per share:
  Income before extraordinary loss and cumulative
     effect on accounting change                       $       0.41     $       0.20     $       0.92     $       0.43
  Extraordinary loss                                             --               --               --               --
  Cumulative effect of accounting change                         --               --               --               --
                                                       ------------     ------------     ------------     ------------
Net income                                             $       0.41     $       0.20     $       0.92     $       0.43
                                                       ============     ============     ============     ============

Cash dividends per share                               $      0.115     $      0.115     $      0.345     $      0.345
                                                       ============     ============     ============     ============
</Table>


     See accompanying notes to consolidated condensed financial statements.


                                       2
<PAGE>




                            BAKER HUGHES INCORPORATED
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                  (In millions)


<Table>
<Caption>

                                                                  September 30,     December 31,
                                                                      2001             2000
                                                                 -------------     -------------
<S>                                                              <C>               <C>
ASSETS                                                            (Unaudited)
CURRENT ASSETS:
  Cash and cash equivalents                                      $        37.2     $        34.6
  Accounts receivable, net                                             1,415.8           1,310.4
  Inventories                                                          1,073.8             898.5
  Other current assets                                                   261.5             243.1
                                                                 -------------     -------------
    Total current assets                                               2,788.3           2,486.6
                                                                 -------------     -------------

Investment in affiliates                                                 897.8             869.3
Property, net                                                          1,340.3           1,378.7
Goodwill and other intangibles, net                                    1,461.8           1,498.1
Other assets                                                             233.8             220.0
                                                                 -------------     -------------
    Total assets                                                 $     6,722.0     $     6,452.7
                                                                 =============     =============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                                               $       589.1     $       469.3
  Short-term borrowings and current portion of long-term debt             12.8              13.3
  Accrued employee compensation                                          282.8             250.6
  Other current liabilities                                              307.6             254.6
                                                                 -------------     -------------
    Total current liabilities                                          1,192.3             987.8
                                                                 -------------     -------------

Long-term debt                                                         1,822.1           2,049.6
Deferred income taxes                                                    245.5             158.6
Other long-term liabilities                                              197.1             210.0

Stockholders' equity:
  Common stock                                                           335.8             333.7
  Capital in excess of par value                                       3,108.8           3,065.7
  Retained earnings (accumulated deficit)                                 95.0            (101.3)
  Accumulated other comprehensive loss                                  (274.6)           (251.4)
                                                                 -------------     -------------
    Total stockholders' equity                                         3,265.0           3,046.7
                                                                 -------------     -------------
    Total liabilities and stockholders' equity                   $     6,722.0     $     6,452.7
                                                                 =============     =============
</Table>


     See accompanying notes to consolidated condensed financial statements.



                                       3
<PAGE>



                            BAKER HUGHES INCORPORATED
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                  (In millions)
                                   (Unaudited)


<Table>
<Caption>

                                                                                  Nine Months Ended
                                                                                    September 30,
                                                                             -------------------------
                                                                                2001           2000
                                                                             ----------     ----------
<S>                                                                          <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                   $    312.0     $    143.3
Adjustments to reconcile net income to net cash flow from operating
  activities:
    Depreciation, depletion and amortization                                      251.2          474.8
    Provision for deferred income taxes                                            60.9           42.8
    Loss on extinguishment of debt                                                  2.3             --
    Gain on disposal or sale of assets                                            (21.1)         (48.9)
    Gain on trading securities                                                       --          (14.1)
    Equity in income of affiliates                                                (38.9)          (1.9)
    Change in accounts receivable                                                (115.5)         (78.0)
    Change in inventories                                                        (177.4)         (53.0)
    Change in accounts payable                                                    116.6            2.8
    Change in accrued employee compensation and other current liabilities          93.6           22.3
    Change in deferred revenue and other long-term liabilities                    (13.5)         (14.5)
    Changes in other assets and liabilities                                       (13.3)         (76.5)
                                                                             ----------     ----------
Net cash flows from operating activities                                          456.9          399.1
                                                                             ----------     ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Expenditures for capital assets and multiclient seismic data                   (204.7)        (452.2)
  Proceeds from disposal or sale of assets                                         55.9          141.3
  Proceeds from sale of trading securities                                           --           72.7
                                                                             ----------     ----------
Net cash flows from investing activities                                         (148.8)        (238.2)
                                                                             ----------     ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings (repayments) from commercial paper and short-term debt            72.1         (167.0)
  Net proceeds from sale/leaseback                                                   --          117.7
  Repayment of indebtedness                                                      (301.8)            --
  Proceeds from issuance of common stock                                           45.1           35.7
  Dividends                                                                      (115.7)        (114.0)
                                                                             ----------     ----------
Net cash flows from financing activities                                         (300.3)        (127.6)
                                                                             ----------     ----------
Effect of foreign exchange rate changes on cash                                    (5.2)          (2.5)
                                                                             ----------     ----------
Increase in cash and cash equivalents                                               2.6           30.8
Cash and cash equivalents, beginning of period                                     34.6           15.6
                                                                             ----------     ----------
Cash and cash equivalents, end of period                                     $     37.2     $     46.4
                                                                             ==========     ==========

Income taxes paid                                                            $     63.2     $     84.8
Interest paid                                                                $     98.6     $    141.9
</Table>

     See accompanying notes to consolidated condensed financial statements.


                                       4
<PAGE>



                            BAKER HUGHES INCORPORATED
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


NOTE 1. BASIS OF PRESENTATION

    The unaudited consolidated condensed financial statements of Baker Hughes
Incorporated and its subsidiaries (the "Company") included herein have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The Company believes that
the presentations and disclosures herein are adequate to make the information
not misleading. The unaudited consolidated condensed financial statements
reflect all adjustments (consisting of normal recurring adjustments) necessary
for a fair presentation of the interim periods. These unaudited consolidated
condensed financial statements should be read in conjunction with the Company's
audited consolidated financial statements included in its Annual Report on Form
10-K for the year ended December 31, 2000. The results of operations for the
interim periods are not necessarily indicative of the results of operations to
be expected for the full year.

    In the notes to the unaudited consolidated condensed financial statements,
all dollar and share amounts in tabulations are in millions of dollars and
shares, respectively, unless otherwise indicated.

NOTE 2. DERIVATIVE INSTRUMENTS

    On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 137 and SFAS No. 138. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
hedging activities that require an entity to recognize all derivatives as an
asset or liability measured at fair value. Depending on the intended use of the
derivative and its effectiveness, changes in its fair value will be reported in
the period of change as either a component of earnings or a component of other
comprehensive income. The adoption of SFAS No. 133 on January 1, 2001 resulted
in a gain of $0.8 million, net of tax, recorded as the cumulative effect of an
accounting change in the consolidated condensed statement of operations and a
gain of $1.2 million, net of tax, recorded in accumulated other comprehensive
income.

    The Company monitors its exposure to various business risks including
commodity price, foreign exchange rate and interest rate risks and occasionally
uses derivative financial instruments to manage the impact of certain of these
risks. The Company's policies do not permit the use of derivative financial
instruments for speculative purposes. The Company uses forward exchange
contracts and currency swaps to hedge certain firm commitments and transactions
denominated in foreign currencies. The Company uses interest rate swaps to
manage interest rate risk. The Company also uses crude oil swaps and collars to
hedge price risk associated with the Company's crude oil production.

    At the inception of any new derivatives, the Company designates the
derivative as a cash flow hedge or fair value hedge. The Company documents all
relationships between hedging instruments and the hedged items, as well as its
risk management objectives and strategy for undertaking various hedge
transactions. The Company assesses whether the derivatives that are used in
hedging transactions are highly effective in offsetting changes in cash flows of
the hedged item at both the inception of the hedge and on an ongoing basis.

    To qualify for hedge accounting, the derivative must qualify either as a
fair value hedge, cash flow hedge or a hedge of the net investment in foreign
operations. A fair value hedge is a hedge of a recognized asset or liability or
an unrecognized firm commitment. Both the effective and ineffective portions of
the changes in the fair value of the derivative, along with the gain or loss on
the hedged item, are recorded in earnings and reported in the consolidated
condensed statements of operations on the same line as the hedged item. A cash
flow hedge is a hedge of a forecasted transaction or the variability of cash
flows to be received or paid in the future related to a recognized asset or
liability. The effective portion of the changes in the fair value of the
derivative is recorded in accumulated other comprehensive income. When the
hedged item is realized, the gain or loss included in accumulated other
comprehensive income is reported on the same line in the consolidated condensed
statements of operations as the hedged item. In addition, both the fair value
changes excluded from the Company's effectiveness assessments and the
ineffective portion of the changes in


                                       5
<PAGE>



                            BAKER HUGHES INCORPORATED
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)


the fair value of derivatives used as cash flow hedges are immediately
recognized in earnings. The Company is not currently hedging any of its net
investments in foreign operations.

    During the three months ended September 30, 2001, the Company had two
interest rate swaps that qualified as fair value hedges. They were fully
effective, resulting in no net gain or loss recorded in the consolidated
condensed statement of operations.

    During the three months ended September 30, 2001, the Company entered into
two crude oil contracts (costless collars) and several foreign currency forward
contracts. During the three months ended September 30, 2001, the Company
recorded a gain of $3.8 million ($2.5 million after tax) in revenue in the
consolidated condensed statement of operations to recognize the effect of
recording the two crude oil contracts at fair value.

NOTE 3. COMPREHENSIVE INCOME

    Comprehensive income includes all changes in equity during a period except
those resulting from investments by and distributions to owners. The components
of the Company's comprehensive income, net of related tax, are as follows:

<Table>
<Caption>

                                                    Three Months Ended             Nine Months Ended
                                                       September 30,                  September 30,
                                              ----------------------------     -----------------------------
                                                  2001            2000             2001             2000
                                              ------------    ------------     ------------     ------------

<S>                                           <C>             <C>              <C>              <C>
Net income                                    $      137.1    $       65.2     $      312.0     $      143.3
Other comprehensive income (loss):
  Foreign currency translation adjustments            16.1           (30.3)           (23.2)           (73.1)
  Adoption of SFAS No. 133                              --              --              1.2               --
  Loss on derivative instruments                        --              --             (1.2)              --
                                              ------------    ------------     ------------     ------------
    Total comprehensive income                $      153.2    $       34.9     $      288.8     $       70.2
                                              ============    ============     ============     ============
</Table>


    Total accumulated other comprehensive loss consisted of the following:

<Table>
<Caption>

                                              September 30,     December 31,
                                                  2001              2000
                                              -------------     -------------

<S>                                           <C>               <C>
Foreign currency translation adjustments      $      (268.3)    $      (245.1)
Pension adjustment                                     (6.3)             (6.3)
                                              -------------     -------------
Total accumulated other comprehensive loss    $      (274.6)    $      (251.4)
                                              =============     =============
</Table>

NOTE 4. UNUSUAL ITEMS

     During the third quarter of 2001, the Company recognized a pre-tax gain of
$3.4 million on the disposition of its interest in a joint venture. The Company
received net proceeds of $6.0 million that were used to repay outstanding
indebtedness.

    During the first quarter of 2001, the Company recorded an unusual charge of
$7.0 million. The cash portion of the charge was $6.0 million and consisted of
severance for approximately 100 employees relating to the restructuring of the
Baker Process operations in Germany. No payments were made during the first
quarter of 2001, $0.3 million was paid during the second quarter of 2001 and
$0.4 million was paid during the third quarter of 2001. Based on current
estimates, the Company expects that $0.6 million of the accrued severance will
be paid during the fourth quarter of 2001, with the remainder paid during 2002
as the employees leave the Company.

    During the third quarter of 2000, the Company recognized a pre-tax gain of
$1.7 million on the sale of a product line. The Company received net proceeds of
$11.2 million that were used to repay outstanding indebtedness.



                                       6
<PAGE>



                            BAKER HUGHES INCORPORATED
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)


    During the second quarter of 2000, the Company recognized a pre-tax gain of
$11.2 million on the sale of two product lines. The Company received net
proceeds of $31.4 million that were used to repay outstanding indebtedness. The
Company also recorded an unusual credit of $12.5 million from net reductions to
unusual charge accruals recorded in 1999 and prior years to reflect the current
estimates of remaining expenditures. The net reductions primarily related to
severance accruals and accruals for lease obligations. These items are reflected
as unusual credits in the consolidated condensed statement of operations.

    During the three and nine months ended September 30, 2000, the Company
recorded pre-tax gains (losses) of $(3.1) million and $14.1 million,
respectively, related to its holdings in Varco International, Inc. ("Varco"). As
of September 30, 2000, the Company had disposed of all of its Varco holdings.

NOTE 5. EXTRAORDINARY LOSS

    On May 28, 2001, the Company redeemed its outstanding Liquid Yield Options
Notes ("LYONS") at a redemption price of $786.13 per $1,000 principal amount,
for a total of $301.8 million. The redemption was funded through the issuance of
commercial paper. In connection with the early extinguishment of debt, the
Company recorded an extraordinary loss of $2.3 million ($1.5 million after tax)
which represents the write-off of the remaining debt issuance costs.

NOTE 6. EARNINGS PER SHARE ("EPS")

    A reconciliation of the number of shares used for the basic and diluted EPS
calculation is as follows:


<Table>
<Caption>

                                                                           Three Months Ended               Nine Months Ended
                                                                              September 30,                   September 30,
                                                                      ----------------------------    ----------------------------
                                                                          2001            2000            2001            2000
                                                                      ------------    ------------    ------------    ------------
<S>                                                                   <C>             <C>             <C>             <C>
Weighted average common shares outstanding for basic
  EPS                                                                        335.8           331.2           335.5           330.5
Effect of dilutive securities - stock plans                                    1.5             2.6             2.0             1.9
                                                                      ------------    ------------    ------------    ------------
Adjusted weighted average common shares outstanding for
  diluted EPS                                                                337.3           333.8           337.5           332.4
                                                                      ============    ============    ============    ============


Future potentially anti-dilutive shares excluded from diluted EPS:
     Options with option price greater than market price                       5.1             3.6             4.6             3.7
     LYONS convertible into common stock                                        --             7.2              --             7.2
</Table>

NOTE 7. INVENTORIES

    Inventories are comprised of the following:

<Table>
<Caption>


                   September 30,   December 31,
                      2001             2000
                   -------------   ------------

<S>                <C>             <C>
Finished goods     $      857.2    $      706.0
Work in process            95.1            82.0
Raw materials             121.5           110.5
                   ------------    ------------
  Total            $    1,073.8    $      898.5
                   ============    ============
</Table>


                                       7

<PAGE>



                            BAKER HUGHES INCORPORATED
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)


NOTE 8. SEGMENT AND RELATED INFORMATION

    The Company has eight divisions that have separate management teams and
infrastructures that offer different products and services. The divisions have
been aggregated into two reportable segments, "Oilfield" and "Process."

    The Oilfield segment consists of six divisions - Baker Atlas, Baker Hughes
INTEQ, Baker Oil Tools, Baker Petrolite, Centrilift and Hughes Christensen -
that manufacture and sell equipment and provide services used in the drilling,
completion, production and maintenance of oil and gas wells and in reservoir
measurement and evaluation. They have been aggregated because the long-term
financial performance of these divisions is affected by similar economic
conditions and the consolidated results are evaluated regularly by the chief
operating decision makers in deciding how to allocate resources and in assessing
performance. The principal markets for this segment include all major oil and
gas producing regions of the world, including North America, Latin America,
Europe, Africa, the Middle East and the Far East. Customers include major
multi-national, independent and national oil companies. The Oilfield segment
also includes the Company's interest in an oil and gas property in Nigeria and
its investments in affiliates.

    The Process segment consists of two divisions - Bird Machine Company and
EIMCO Process Equipment - that manufacture and sell process equipment for
separating solids from liquids and liquids from liquids through filtration,
sedimentation, centrifugation and flotation processes. The principal markets for
this segment include all regions of the world where there are significant
industrial, chemical, and municipal wastewater applications and base metals
activity. Customers include municipalities, contractors, engineering companies
and pulp and paper, minerals, industrial and oil and gas producers. The Process
segment also includes a refining and production product line. On October 30,
2001, the Company contributed certain assets and liabilities of this product
line to a new entity in exchange for cash, notes receivable and an ownership
interest in the new entity.

    The Company evaluates the performance of its segments based on income before
income taxes, accounting changes, unusual items and interest income and expense.
Intersegment sales and transfers are not significant.

    Summarized segment financial information is shown in the following table.
The "Other" column includes corporate-related items, net interest expense and,
as it relates to segment profit (loss), income and expense items not allocated
to reportable segments.


<Table>
<Caption>

                                           Oilfield        Process           Other            Total
                                         ------------    ------------     ------------     ------------
<S>                                      <C>             <C>              <C>              <C>
REVENUES
Three months ended September 30, 2001    $    1,348.8    $       87.2     $         --     $    1,436.0
Three months ended September 30, 2000    $    1,273.5    $       80.2     $         --     $    1,353.7

Nine months ended September 30, 2001     $    3,762.8    $      243.7     $         --     $    4,006.5
Nine months ended September 30, 2000     $    3,605.3    $      244.7     $         --     $    3,850.0

SEGMENT PROFIT (LOSS)
Three months ended September 30, 2001    $      263.2    $       (2.6)    $      (54.7)    $      205.9
Three months ended September 30, 2000    $      167.6    $       (0.6)    $      (64.6)    $      102.4

Nine months ended September 30, 2001     $      669.8    $       (9.9)    $     (189.5)    $      470.4
Nine months ended September 30, 2000     $      388.4    $       (3.5)    $     (166.3)    $      218.6

TOTAL ASSETS
As of September 30, 2001                 $    5,842.0    $      337.3     $      542.7     $    6,722.0
As of December 31, 2000                  $    5,597.9    $      332.3     $      522.5     $    6,452.7
</Table>


                                       8
<PAGE>



                            BAKER HUGHES INCORPORATED
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)


    The following table presents the details of "Other" segment loss:


<Table>
<Caption>

                                          Three Months Ended               Nine Months Ended
                                             September 30,                   September 30,
                                     -----------------------------     -----------------------------
                                         2001             2000            2001             2000
                                     ------------     ------------     ------------     ------------
<S>                                  <C>              <C>              <C>              <C>
Corporate expenses                   $      (28.7)    $      (20.3)    $      (91.9)    $      (75.7)
Interest, net                               (29.4)           (42.9)           (94.0)          (130.1)
Unusual (charge) credit                       3.4              1.7             (3.6)            25.4
Gain (loss) on trading securities              --             (3.1)              --             14.1
                                     ------------     ------------     ------------     ------------
  Total                              $      (54.7)    $      (64.6)    $     (189.5)    $     (166.3)
                                     ============     ============     ============     ============
</Table>


NOTE 9. NEW ACCOUNTING PRONOUNCEMENTS

    In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, Business Combinations. SFAS No. 141 requires that all business
combinations initiated after June 30, 2001 be accounted for under the purchase
method and addresses the initial recognition and measurement of goodwill and
other intangible assets acquired in a business combination. Business
combinations accounted for under the pooling of interest method prior to June
30, 2001 will not be changed. The adoption of SFAS No. 141 by the Company will
not have an impact on the balance sheet, statement of operations or cash flows
of the Company.

    In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142 addresses the initial recognition and measurement of
intangible assets acquired in a business combination and the accounting for
goodwill and other intangible assets subsequent to their acquisition. SFAS No.
142 provides that intangible assets with finite useful lives be amortized and
that goodwill and intangible assets with indefinite lives not be amortized, but
rather be tested at least annually for impairment. SFAS No. 142 requires that a
transitional impairment test be performed within six months of adoption. Any
transitional impairment loss will be recognized as the cumulative effect of a
change in accounting principle. The Company has not completed its analysis of
the impact of the adoption of SFAS No. 142 on its consolidated financial
statements. The Company will adopt SFAS No. 142 for its fiscal year beginning
January 1, 2002.

    In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of long-lived assets and the
associated asset retirement costs. SFAS No. 143 requires that the fair value of
a liability associated with an asset retirement be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
associated retirement costs are capitalized as part of the carrying amount of
the long-lived asset and subsequently depreciated over the life of the asset.
The Company has not completed its analysis of the impact, if any, of the
adoption of SFAS No. 143 on its consolidated financial statements. The Company
will adopt SFAS No. 143 for it fiscal year beginning January 1, 2003.

    In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 addresses the financial
accounting and reporting for the impairment or disposal of long-lived assets.
SFAS No. 144 replaces SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. SFAS No. 144 provides
updated guidance concerning the recognition and measurement of an impairment
loss for certain types of long-lived assets and modifies the accounting and
reporting of discontinued operations. The Company currently expects there to be
no impact on the Company's consolidated financial statements upon adoption of
SFAS No. 144. The Company will adopt SFAS No. 144 for its fiscal year beginning
January 1, 2002.



                                       9
<PAGE>



                            BAKER HUGHES INCORPORATED
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)


NOTE 10. SUBSEQUENT EVENT

    On October 30, 2001, the Company and Sequel Holdings, Inc. ("Sequel")
created an entity to operate under the name of Petreco, Inc. ("Petreco"). The
Company contributed approximately $19.0 million of net assets of the refining
and production product line of its Baker Process segment to Petreco. In
conjunction with the transaction, the Company received $9.0 million in cash, two
promissory notes totaling $10.0 million, and an ownership interest consisting of
100% of the common stock of Petreco, which represents 49% of the voting power of
Petreco. Sequel has an ownership interest in Petreco consisting of 100% of the
Series A Preferred Stock, which represents 51% of the voting power of Petreco.
Petreco profits would be shared by the Company and Sequel in 49% and 51%
interests, respectively. Sequel is entitled to a liquidation preference upon the
liquidation or sale of Petreco. The amount of the promissory notes is subject to
adjustment resulting from achieving certain financial targets in 2001. The
Company will account for its ownership in Petreco using the equity method and
does not expect to recognize any gain or loss from the initial formation of the
entity due to the Company's material continued involvement in the operations of
Petreco.



                                       10
<PAGE>



         ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


    Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") should be read in conjunction with the Company's
consolidated condensed financial statements and the related notes thereto.

FORWARD-LOOKING STATEMENTS

    MD&A includes forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended (each a "Forward-Looking Statement"). The words
"anticipate," "believe," "expect," "plan," "intend," "estimate," "project,"
"forecasts," "will," "could," "may" and similar expressions, and the negative
thereof, are intended to identify forward-looking statements. No assurance can
be given that actual results may not differ materially from those in the
forward-looking statements herein for reasons including the effects of
competition, the level of petroleum industry exploration and production
expenditures, world economic conditions, prices of, and the demand for, crude
oil and natural gas, drilling activity, weather, the legislative environment in
the United States and other countries, OPEC policy, conflict in the Middle East
and other major petroleum producing or consuming regions, acts of war or
terrorism, the development of technology that lowers overall finding and
development costs and the condition of the capital and equity markets. See
"-Business Environment" for a more detailed discussion of certain of these
factors.

    Baker Hughes' expectations regarding its level of capital expenditures
described in "-Capital Resources and Liquidity - Investing Activities" below are
only its forecasts regarding these matters. In addition to the factors described
in the previous paragraph and in "-Business Environment," these forecasts may be
substantially different from actual results, which are affected by the following
factors: the accuracy of the Company's estimates regarding its spending
requirements; regulatory, legal and contractual impediments to spending
reduction measures; the occurrence of any unanticipated acquisition or research
and development opportunities; changes in the Company's strategic direction; and
the need to replace any unanticipated losses in capital assets.

BUSINESS ENVIRONMENT

    The Company has eight divisions each with separate management teams and
infrastructures that offer different products and services. The divisions have
been aggregated into two reportable segments - "Oilfield" and "Process."

    The Oilfield segment currently consists of six divisions - Baker Atlas,
Baker Hughes INTEQ, Baker Oil Tools, Baker Petrolite, Centrilift and Hughes
Christensen - that manufacture and sell equipment and provide related services
used in exploring for, developing and producing hydrocarbon reserves. The
Oilfield segment also includes the Company's interest in an oil and gas property
in Nigeria.

    The Process segment consists of two divisions - Bird Machine Company and
EIMCO Process Equipment - that manufacture and sell process equipment for
separating solids from liquids and liquids from liquids through filtration,
sedimentation, centrifugation and flotation processes. The Process segment also
includes a refining and production product line. On October 30, 2001, the
Company contributed certain assets and liabilities of this product line to a new
entity in exchange for cash, notes receivable and an ownership interest in the
new entity.

    The business environment for the Company's Oilfield segment and its
corresponding operating results can be significantly affected by the level of
industry capital expenditures for the exploration and production of oil and gas
reserves. These expenditures are influenced strongly by oil company expectations
about the supply and demand for crude oil and natural gas products and by the
energy price environment that results from supply and demand imbalances.

    Key factors currently influencing the worldwide crude oil and gas markets
are:

o    Production control: the degree to which OPEC nations and other large
     producing countries, such as Mexico, Norway, and Russia, are willing and
     able to control production and exports of crude oil.



                                       11
<PAGE>

o    Global economic growth: particularly the impact of the U.S. and Western
     European economies and economic activity in Japan, China, South Korea and
     the developing areas of Asia where the correlation between energy demand
     and economic growth is strong.

o    Oil and gas storage inventories: relative to historic levels.

o    Technological progress: in the design and application of new products that
     allow oil and gas companies to drill fewer wells and to drill, complete and
     produce wells faster and at lower cost.

o    Maturity of the resource base: of known hydrocarbon reserves in the
     maturing provinces of the North Sea, U.S., Canada and Latin America.

o    The pace of new investment: access to capital and the reinvestment of
     available cash flow into existing and emerging markets.

o    Price volatility: the impact of widely fluctuating commodity prices on the
     stability of the market and subsequent impact on customer spending.

o    The potential for supply disruption: from key oil exporting countries,
     including, but not limited to, Iraq, Saudi Arabia, and other Middle Eastern
     countries, due to political or military activity.

o    Weather: the impact of variations in temperatures as compared with normal
     weather patterns and the related effect on demand for oil and natural gas.

o    Acts of Terrorism: the recent terrorist attacks on the United States have
     had a variety of adverse effects on business, financial and general
     economic conditions in the U.S. and elsewhere. In addition, the complete
     U.S. response to these attacks is unknown. At this time, the Company is not
     able to predict the nature, extent and duration of these effects, if any,
     on the Company's business and finances.

OIL AND GAS PRICES

    Generally, customer expectations about their prospects from oil and gas
sales and customer expenditures to explore for or produce oil and gas rise or
fall with corresponding changes in the prices of oil or gas. Accordingly,
changes in these expenditures will normally result in increased or decreased
demand for the Company's products and services in its Oilfield segment. Crude
oil and natural gas prices are summarized in the table below as averages of the
daily closing prices during each of the periods indicated. While reading the
Company's outlook set forth below, caution is advised that the factors described
above in "-Forward-Looking Statements" and "-Business Environment" could
negatively impact the Company's expectations for oil and gas demand, oil and gas
prices and drilling activity.


<Table>
<Caption>

                                                        Three Months Ended             Nine Months Ended
                                                           September 30,                  September 30,
                                                    ----------------------------    ----------------------------
                                                        2001            2000           2001            2000
                                                    ------------    ------------    ------------    ------------

<S>                                                 <C>             <C>             <C>             <C>
Crude Oil, US Spot Prices, WTI, Cushing ($/Bbl)     $      27.07    $      31.65    $      27.92    $      29.83
Natural Gas, US Spot Prices, Henry Hub ($/MMBtu)    $       2.69    $       4.49    $       4.43    $       3.57
</Table>

    During the three months ended September 30, 2001, oil prices averaged $27.07
per barrel, ranging from a weekly low of $23.43 per barrel to a high of $29.89
per barrel. Slower economic growth and higher OPEC production levels contributed
to an increase in inventories and a moderation in oil prices. Although oil
prices fell in the three months ended September 30, 2001 compared with the three
months ended September 30, 2000, prices were generally above OPEC's
self-declared target zone.

    During the three months ended September 30, 2001, natural gas prices
averaged $2.69/MMBtu, down significantly compared with the $4.49/MMBtu average
price for the three months ended September 30, 2000. Weekly prices during the
third quarter of 2001 ranged from a high of $3.23/MMBtu to a low of $1.82/MMBtu.
The decline in natural gas prices was driven by a decline in demand for natural
gas, slowing U.S. economic growth and reduced storage injection demand, offset
only partially by increased demand from fuel switching back to natural gas. A
modest increase in production also



                                       12
<PAGE>

contributed to the decline in prices. By the end of the quarter, it became
apparent that natural gas storage levels at the beginning of the winter
2001/2002 withdrawal season would likely approach historic highs.

ROTARY RIG COUNT

    The Company is engaged in the oilfield service industry providing products
and services that are used in exploring for, developing and producing oil and
gas reservoirs. When drilling or workover rigs are active, they consume the
products and services produced by the oilfield service industry. The active rig
count acts as a leading indicator of consumption of products and services used
in drilling, completing, producing and processing hydrocarbons.

    Rig count trends are governed by the exploration and development spending by
oil and gas companies, which in turn is influenced by current and future price
expectations for oil and natural gas. Rig counts therefore reflect the relative
strength and stability of energy prices. The Company's rotary rig counts are
summarized in the table below as averages for each of the periods indicated and
are based on weekly rig counts for the U.S. and Canada and monthly rig counts
for all other areas.

<Table>
<Caption>

                               Three Months Ended           Nine Months Ended
                                 September 30,                September 30,
                           --------------------------    --------------------------
                              2001            2000           2001           2000
                           -----------    -----------    -----------    -----------
<S>                        <C>            <C>            <C>            <C>
U.S.  - Land                     1,093            829          1,046            728
U.S.  - Offshore                   149            154            161            137
Canada                             323            313            363            335
                           -----------    -----------    -----------    -----------
  North America                  1,565          1,296          1,570          1,200
                           -----------    -----------    -----------    -----------
Latin America                      264            247            265            216
North Sea                           57             51             55             44
Other Europe                        39             39             38             38
Africa                              53             47             54             44
Middle East                        186            161            177            153
Asia Pacific                       158            149            155            137
                           -----------    -----------    -----------    -----------
  Outside North America            757            694            744            632
                           -----------    -----------    -----------    -----------
Worldwide                        2,322          1,990          2,314          1,832
                           ===========    ===========    ===========    ===========


U.S.  Workover Rigs              1,227          1,027          1,233          1,034
                           ===========    ===========    ===========    ===========
</Table>


OUTLOOK

    While reading the Company's outlook set forth below, caution is advised that
the factors described above in "-Forward Looking Statements" and "-Business
Environment" could negatively impact the Company's expectations for oil demand,
oil and gas prices and drilling activity.

    Oil - Through the fourth quarter of 2001, oil prices are expected to be
influenced primarily by expectations for U.S. and world economies and OPEC's
willingness and ability to control production to achieve its price targets.
Other factors that could influence prices include changes in non-OPEC oil
supply, exports of oil from Iraq, political- or military-based supply
disruptions, and weather. Oil prices are expected to weaken throughout the
fourth quarter of 2001 and into the first half of 2002. If OPEC is willing and
able to act aggressively to support prices and if the U.S. and world economies
do not weaken significantly, the decline is likely to be more modest. On the
other hand, if OPEC is unwilling or unable to act aggressively to support prices
and if the U.S. and world economies weaken, oil prices could weaken
significantly.

    Natural Gas - U. S. natural gas prices are expected to average between
$2.50-$3.30/MMBtu in the fourth quarter of 2001 with possible weather-driven
price spikes above or below this range. In the fourth quarter of 2001 and
throughout 2002, prices are expected to be influenced by U.S. economic activity,
particularly in those industrial segments of the U.S. economy that consume
natural gas; demands for electricity; deviations of the weather from normal
patterns; the natural gas storage levels at the end of the winter 2001/2002
withdrawal season; and expectations regarding the ability of the industry to
inject enough gas during the summer of 2002 to meet demands during the winter of
2002/2003. Lower natural gas prices in the second half of 2002 are expected to
result in decreased North American natural gas-directed drilling activity in the
fourth quarter of 2001 and into the first half of 2002, which is, in turn,
expected to result in reduced North American natural gas production capacity.


                                       13
<PAGE>

    Customer Spending - Based upon the Company's discussions with its major
customers and review of published industry surveys and reports, anticipated
customer spending trends are as follows:

    o   North America - In the fourth quarter of 2001, customer spending is
        expected to decrease from the third quarter of 2001. Spending in North
        America is expected to be down 15-20% in 2002 compared with 2001.

    o   Outside North America - Customer spending directed at developing oil
        supplies is expected to continue to increase modestly through the fourth
        quarter of 2001 and into the first half of 2002.

RESULTS OF OPERATIONS

REVENUES

    Revenues for the three months ended September 30, 2001 increased 6.1% to
$1,436.0 million compared with revenues of $1,353.7 million for the three months
ended September 30, 2000. Excluding revenues from Western Geophysical, the
Company's seismic division that was contributed to a venture in November 2000,
revenues increased 22.4% for the three months ended September 30, 2001 compared
with the three months ended September 30, 2000.

    Oilfield revenues, excluding Western Geophysical, increased 23.4% to
$1,348.8 million for the three months ended September 30, 2001 compared with
revenues of $1,092.6 million for the three months ended September 30, 2000.
Geographically, Oilfield revenues in North America, which account for 45.5% of
total Oilfield revenues, increased 35.0% for the three months ended September
30, 2001 compared with the three months ended September 30, 2000. This increase
reflects the increased drilling activity in this area, as evidenced by a 20.8%
increase in the North American rig count, and improved pricing for the Company's
products and services. Outside North America, Oilfield revenues increased 15.2%
for the three months ended September 30, 2001 compared with the three months
ended September 30, 2000. This increase reflects the ongoing improvement in
international drilling activity, particularly in Latin America, the North Sea,
the Middle East and Asia Pacific.

    Revenues for the nine months ended September 30, 2001 increased 4.1% to
$4,006.5 million compared with revenues of $3,850.0 million for the nine months
ended September 30, 2001. Excluding revenues from Western Geophysical, revenues
increased 22.4% for the nine months ended September 30, 2001 compared with the
nine months ended September 30, 2000. Revenues were impacted by significantly
higher drilling activity levels worldwide and improved pricing for the Company's
products and services.

GROSS MARGIN

    Gross margin for the three months ended September 30, 2001 and 2000 was
29.7% and 24.7%, respectively. Excluding Western Geophysical, gross margin for
the three months ended September 30, 2001 and 2000 was 29.7% and 26.1%,
respectively. Gross margin for the nine months ended September 30, 2001 and 2000
was 28.6% and 22.7%, respectively. Excluding Western Geophysical, gross margin
for the nine months ended September 30, 2001 and 2000 was 28.6% and 25.0%,
respectively. The improvements in gross margin are primarily the result of
pricing improvements for the Company's products and services, primarily in North
America, and higher utilization of the Company's assets. In addition,
productivity gains at every Oilfield division and continued cost management
measures throughout the Company contributed to the improvement.

SELLING, GENERAL AND ADMINISTRATIVE

    Selling, general and administrative ("SG&A") expense as a percentage of
consolidated revenues was 15.0% and 13.9%, for the three months ended September
30, 2001 and 2000, respectively. Excluding Western Geophysical, SG&A expense as
a percentage of consolidated revenues for the three months ended September 30,
2001 and 2000 was 15.0% and 15.1%, respectively. SG&A expense as a percentage of
consolidated revenues for the nine months ended September 30, 2001 and 2000 was
15.4% and 14.7%, respectively. Excluding Western Geophysical, SG&A expense as a
percentage of consolidated revenues for the nine months ended September 30, 2001
and 2000 was 15.4% and 16.6%, respectively. These decreases in SG&A expense as a
percentage of consolidated revenues are primarily due to a higher revenue base
and the fact that SG&A expenses are generally more fixed in nature.



                                       14
<PAGE>

UNUSUAL CHARGES

2001

     During the third quarter of 2001, the Company recognized a pre-tax gain of
$3.4 million on the disposition of its interest in a joint venture. The Company
received net proceeds of $6.0 million that were used to repay outstanding
indebtedness.

    During the first quarter of 2001, the Company recorded an unusual charge of
$7.0 million. The cash provision of the charge totaled $6.0 million and
consisted of severance costs for approximately 100 employees relating to the
restructuring of the Baker Process operations in Germany. No payments were made
during the first quarter of 2001, $0.3 million was paid in the second quarter of
2001, and $0.4 million was paid in the third quarter of 2001. Based on current
estimates, the Company expects that $0.6 million of the accrued severance will
be paid during the fourth quarter of 2001, with the remainder paid during 2002
as the employees leave the Company.

2000

    In October 2000, the Company's Board of Directors approved the Company's
plan to substantially exit the oil and gas exploration business, resulting in an
unusual charge of $105.0 million. The cash provision of the charge totaled $13.3
million and consisted of $5.5 million of severance costs for approximately 50
employees and $7.8 million for other contractual obligations. Of the total cash
charge of $13.3 million, $5.2 million has been paid through September 30, 2001.
The remaining accrual will be paid out as the employees leave the Company or
according to the contractual obligations.

INTEREST EXPENSE

    Interest expense for the three and nine months ended September 30, 2001
decreased $13.3 million and $35.1 million, respectively, compared with the three
and nine months ended September 30, 2000. These decreases were primarily due to
lower debt levels. Average commercial paper and money market borrowings for the
three and nine months ended September 30, 2001 were $365.8 million and $283.3
million, respectively, compared with average commercial paper and money market
borrowings for the three and nine months ended September 30, 2000 of $988.9
million and $1,042.5 million, respectively. The reduction in commercial paper
and money market borrowings from corresponding prior year periods was primarily
due to the cash proceeds received from the formation of Western GECO in November
2000 and cash flow from operations.

GAIN ON TRADING SECURITIES

    In the fourth quarter of 1999, the Company announced its intention to sell
its holdings of Varco International, Inc. ("Varco") and reclassified these
holdings from available for sale securities to trading securities. During the
three and nine months ended September 30, 2000, the Company recorded pre-tax
gains (losses) of $(3.1) million and $14.1 million, respectively. As of
September 30, 2000, the Company had disposed of all of its Varco holdings.

INCOME TAXES

    The effective income tax rate for the three months ended September 30, 2001
and 2000 was 33.4% and 36.3%, respectively. The effective income tax rate for
the nine months ended September 30, 2001 and 2000 was 33.5% and 34.4%,
respectively. These rates differ from the statutory income tax rate of 35.0% due
to lower taxes from international operations, partially offset by the
non-deductibility of certain goodwill amortization.

CAPITAL RESOURCES AND LIQUIDITY

OPERATING ACTIVITIES

    Net cash inflows from operating activities were $456.9 million and $399.1
million for the nine months ended September 30, 2001 and 2000, respectively. The
increase in cash flow is primarily due to increased profitability and improved
balance sheet management.



                                       15
<PAGE>

INVESTING ACTIVITIES

    Net cash outflows from investing activities were $148.8 million and $238.2
million for the nine months ended September 30, 2001 and 2000, respectively.

    Expenditures for capital assets totaled $204.7 million and $452.2 million
for the nine months ended September 30, 2001 and 2000, respectively. Excluding
Western Geophysical, expenditures for capital assets were $204.7 million and
$205.7 million for the nine months ended September 30, 2001 and 2000,
respectively. The Company currently expects 2001 capital expenditures to be
between $300.0 million to $315.0 million excluding any acquisitions. Funds
provided from operations and available lines of credit are expected to be
adequate to meet future capital expenditure requirements.

    Proceeds from the disposal or sale of assets generated $55.9 million and
$141.3 million for the nine months ended September 30, 2001 and 2000,
respectively. Proceeds from the sale of the Company's Varco holdings generated
$72.7 million in the nine months ended September 30, 2000.

    The words "expected" and "expects" are intended to identify Forward-Looking
Statements in "Investing Activities." See "-Forward-Looking Statements" and
"-Business Environment" above for a description of risk factors related to these
Forward-Looking Statements.

FINANCING ACTIVITIES

    Net cash outflows from financing activities were $300.3 million and $127.6
million for the nine months ended September 30, 2001 and 2000, respectively.

    On May 28, 2001, the Company redeemed its outstanding Liquid Yield Options
Notes at a redemption price of $786.13 per $1,000 principal amount, for a total
of $301.8 million. The redemption was funded through the issuance of commercial
paper. The Company anticipates that the redemption will not have a significant
impact on interest expense in future periods.

    Total debt outstanding at September 30, 2001 was $1,834.9 million compared
with $2,062.9 million at December 31, 2000. Debt was repaid using cash flow from
operations and $55.9 million in proceeds from the disposal or sale of assets.
The debt to equity ratio was 0.56 at September 30, 2001 compared with 0.68 at
December 31, 2000.

    At September 30, 2001, the Company had $1,278.3 million of credit facilities
with commercial banks, of which $800.5 million was committed. These facilities
are subject to normal banking terms and conditions that do not significantly
restrict the Company's activities.

DERIVATIVE AND HEDGE ACCOUNTING

    On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 137 and SFAS No. 138. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
hedging activities that require an entity to recognize all derivatives as an
asset or liability measured at fair value. Depending on the intended use of the
derivative and its effectiveness, changes in its fair value will be reported in
the period of change as either a component of earnings or a component of other
comprehensive income. The adoption of SFAS No. 133 on January 1, 2001 resulted
in a gain of $0.8 million, net of tax, recorded as the cumulative effect of an
accounting change in the consolidated condensed statement of operations and a
gain of $1.2 million, net of tax, recorded in accumulated other comprehensive
income.

EURO CONVERSION

    A single European currency (the "Euro") was introduced on January 1, 1999,
at which time the conversion rates between the old, or legacy, currencies and
the Euro were set for participating member countries. However, the legacy
currencies in those countries will continue to be used as legal tender through
December 31, 2001. Thereafter, the legacy currencies will be canceled, and Euro
bills and coins will be used in the participating countries.



                                       16
<PAGE>

    Most of the Company's products and services are essentially priced with
reference to the U.S. dollar. As a result, the Company does not believe that it
will be subject to a significant increase in pricing transparency due to the
introduction of the Euro. The Company's customers may require billing in two or
more currencies. Until the Company's financial computer systems are modified or
replaced to handle Euro-denominated transactions, the Company will, in most
cases, need to apply a methodology whereby legacy currencies are first converted
into Euros according to a legally prescribed fixed exchange ratio and then, when
the customer requires, converted from Euros to a second national currency. The
Company does not believe that this conversion will materially affect its
contracts. Most of the Company's contracts are either bids in response to
requests for tenders or purchase orders, both of which are short term in nature.
Longer term contracts are sufficiently flexible to permit pricing in multiple
currencies. The Euro conversion period is longer than most of the pricing
features of these contracts, thus permitting a pricing conversion to the Euro as
new orders are issued. The same is true with most of the Company's contracts
with vendors.

    During 1997, the Company began a multi-year initiative designed to develop
and implement an enterprise-wide software system. The initiative, named "Project
Renaissance," utilizes SAP R/3 as its software platform across all significant
operations of the Company. SAP R/3 is programmed to process in Euros for most of
the Company's accounting, financial and operational functions, and the Company
expects that the implementation of this system will address its Euro issues in
these areas. Because the Company has engaged in this implementation for
operational purposes and not solely to address Euro issues, the Company has not
separately determined the cost of converting these systems for use with the
Euro. These Euro conversion costs are embedded in the cost of Project
Renaissance and are not susceptible to separate quantification. The Company has
completed or will complete implementation of SAP R/3 in its major European
operations prior to December 31, 2001. In operations where SAP R/3 will not be
implemented, the Company will make certain modifications to its legacy computer
systems, or replace them, to address certain Euro conversion issues. The Company
began converting certain legacy currency based financial records to the Euro
beginning in January 2001, and as of October 31, 2001, had completed a
conversion of all significant operations. The financial records of the remaining
operations are expected to be converted by December 15, 2001.

    The Company continues to assess the impact of the Euro on its operations and
financial, accounting and operational systems. The Company does not presently
anticipate that the transition to the Euro will have a significant impact on its
results of operations, financial position or cash flows.

    The words "anticipate," "will," "may," and "expects" are intended to
identify a Forward-Looking Statement in " - Euro Conversion." The Company's
anticipation regarding the lack of significance of the Euro introduction on the
Company's operations is only its forecast regarding this matter. This forecast
may be substantially different from actual results, which are affected by
factors such as the following: unforeseen difficulties in remediating specific
computer systems to accommodate the Euro due to the complexity of hardware and
software; the failure of the Company to implement SAP R/3 or another Euro
compliant computer system in a geographic location that prices in Euros; the
inability of third parties to adequately address their own Euro systems issues,
including vendors, contractors, financial institutions, U.S. and foreign
governments and customers; the delay in completion of a phase of the Company's
remediation of a computer system to accommodate the Euro necessary to begin a
later phase; the discovery of a greater number of hardware and software systems
or technologies with material Euro issues than the Company presently
anticipates; and the lack of alternatives that the Company previously believed
existed.



                                       17
<PAGE>



          ITEM 3. QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURES


    During the quarter, the Company entered into two crude oil contracts
(costless collars) to mitigate price risk associated with the Company's interest
in an oil producing property in Nigeria. Both contracts used Dated Brent as the
reference commodity. The Company entered into the first contract on August 2,
2001. This contract established a cap of $27.00 and a floor of $23.25 for the
five-month period ending December 31, 2001. The Company entered into the second
contract on September 14, 2001. This contract established a cap of $27.50 and a
floor of $23.50 for the six-month period ending June 30, 2002. The fair market
value of these contracts at September 30, 2001 resulted in an asset of $1.1
million and an asset $2.7 million, respectively. Due to the value of the
contracts and the Company's opinion that current oil prices would not be
sustainable, the Company elected to terminate these contracts prior to their
maturity date. Accordingly, both contracts were terminated on October 3, 2001,
and the Company received a cash payment of $4.4 million.

    At September 30, 2001, the Company had entered into foreign currency forward
contracts with notional amounts of $0.4 million, $5.1 million and $0.8 million
to hedge exposure to currency fluctuations in the Euro, Canadian Dollar and
Indonesian Rupiah, respectively. At September 30, 2001, the fair market value of
these forward contracts, based on quoted market prices for contracts with
similar terms and maturity dates, was a $0.2 million liability.

    Certain borrowings of the Company are denominated in currencies other than
its functional currency. At September 30, 2001, these nonfunctional currency
borrowings totaled $14.7 million with exposures primarily between the U.S.
Dollar and the Euro, the Saudi Riyal, the Brazilian Real and the Thai Baht. A
10% appreciation of the U.S. Dollar against these currencies would not have a
significant effect on the future earnings of the Company.




                                       18
<PAGE>



                           PART II. OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

    The Company has been named as a defendant in a number of shareholder class
action securities fraud suits that purported stockholders of the Company filed
shortly after the Company's announcement on December 8, 1999 regarding the
accounting issues that the Company discovered at its Baker Hughes INTEQ
division. These suits were consolidated into one lawsuit in the federal district
court for the Southern District of Texas pursuant to the Private Securities
Litigation Reform Act of 1995. The court dismissed this suit in March 2001, and
the plaintiffs filed an appeal with respect to the dismissal in April 2001 in
the U.S. Fifth Circuit Court of Appeals. The Company believes the allegations in
this suit are without merit and that the plaintiffs will be unsuccessful in
their appeal. The Company intends to vigorously contest the appeal and defend
the suit if the plaintiffs are successful on appeal. Even so, an adverse outcome
on appeal and in any subsequent litigation could have an adverse impact on the
Company's results of operations or financial condition.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a) Exhibits:

       3.2 Bylaws, as amended on October 25, 2001.

    (b) Reports on Form 8-K:

       A Current Report on Form 8-K was filed with the Commission on July 6,
    2001, reporting the issuance of a press release whereby the Company had
    offered to consent to the entry of a cease-and-desist order with the U.S.
    Securities and Exchange Commission.

       A Current Report on Form 8-K was filed with the Commission on September
    12, 2001, reporting the issuance by the Commission of the order in the
    Administrative Proceeding related to the matter reported in the Current
    Report on Form 8-K filed on July 6, 2001.



                                       19
<PAGE>



                                   SIGNATURES


    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                      BAKER HUGHES INCORPORATED
                                      (REGISTRANT)



Date:  November 13, 2001              By:  /s/ G. STEPHEN FINLEY
                                      ------------------------------------------
                                      Sr. Vice President - Finance and
                                      Administration and Chief Financial Officer
                                      (principal financial officer)


Date:  November 13, 2001              By:  /s/ ALAN J. KEIFER
                                      ------------------------------------------
                                      Vice President and Controller
                                      (principal accounting officer)



                                       20
<PAGE>

                                 EXHIBIT INDEX


EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------

  3.2                Bylaws, as amended on October 25, 2001.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>3
<FILENAME>h92238ex3-2.txt
<DESCRIPTION>BYLAWS, AS AMENDED OCTOBER 25, 2001
<TEXT>
<PAGE>
                                                                     EXHIBIT 3.2






                                     BYLAWS
                                       OF
                            BAKER HUGHES INCORPORATED




















                                   As Amended
                                October 25, 2001




<PAGE>


                                Table of Contents

<Table>
<Caption>
                                                                       Page No.
                                                                       --------
<S>                                                                    <C>
ARTICLE I - Offices .........................................................1

   Section 1.  Registered Office ............................................1
   Section 2.  Other Offices ................................................1

ARTICLE II - Meetings of Stockholders .......................................1

   Section 1.  Place of Meetings.............................................1
   Section 2.  Annual Meeting of Stockholders................................1
   Section 3.  Quorum; Adjourned Meetings and Notice Thereof ................1
   Section 4.  Voting .......................................................2
   Section 5.  Proxies.......................................................2
   Section 6.  Special Meetings .............................................2
   Section 7.  Notice of Stockholders' Meetings .............................2
   Section 8.  Waiver of Notice .............................................2
   Section 9.  Maintenance and Inspection of Stockholder List ...............3
   Section 10. Stockholder Action by Written Consent Without a Meeting ......3
   Section 11. Inspectors of Election .......................................3
   Section 12. Procedure for Stockholders' Meetings..........................4
   Section 13. Order of Business ............................................4
   Section 14. Procedures for Bringing Business before an Annual Meeting ....4
   Section 15. Procedures for Nominating Directors ..........................5

ARTICLE III - Directors .....................................................5

   Section 1.  Number and Qualification of Directors ........................5
   Section 2.  Election and Term of Office ..................................6
   Section 3.  Resignation and Removal of Directors .........................6
   Section 4.  Vacancies ....................................................7
   Section 5.  Powers .......................................................7
   Section 6.  Place of Directors' Meetings .................................7
   Section 7.  Regular Meetings .............................................7
   Section 8.  Special Meetings .............................................7
   Section 9.  Quorum .......................................................8
   Section 10. Action Without Meeting .......................................8
   Section 11. Telephonic Meetings ..........................................8
   Section 12. Meetings and Action of Committees ............................8
   Section 13. Special Meetings of Committees ...............................9
   Section 14. Minutes of Committee Meetings ................................9
   Section 15. Compensation of Directors ....................................9
   Section 16. Indemnification ..............................................9
</Table>


                                       ii
<PAGE>

<Table>
<S>                                                                         <C>
ARTICLE IV - Officers ......................................................11

   Section 1.  Officers ....................................................11
   Section 2.  Election of Officers ........................................11
   Section 3.  Subordinate Officers ........................................11
   Section 4.  Removal and Resignation of Officers .........................12
   Section 5.  Vacancies in Offices ........................................12
   Section 6.  Chairman of the Board .......................................12
   Section 7.  Vice Chairman of the Board ..................................12
   Section 8.  President ...................................................12
   Section 9.  Vice Presidents .............................................12
   Section 10. Secretary ...................................................12
   Section 11. Chief Financial Officer .....................................13
   Section 12. Treasurer and Controller  ...................................13

ARTICLE V - Certificate of Stock ...........................................13

   Section 1.  Certificates ................................................13
   Section 2.  Signatures on Certificates ..................................13
   Section 3.  Statement of Stock Rights, Preferences, Privileges ..........14
   Section 4.  Lost Certificates ...........................................14
   Section 5.  Transfers of Stock ..........................................14
   Section 6.  Fixing Record Date ..........................................14
   Section 7.  Registered Stockholders .....................................15

ARTICLE VI - General Provisions - Dividends ................................15

   Section 1.  Dividends ...................................................15
   Section 2.  Payment of Dividends; Directors' Duties......................15
   Section 3.  Checks ......................................................15
   Section 4.  Corporate Contracts and Instruments .........................15
   Section 5.  Fiscal Year .................................................15
   Section 6.  Manner of Giving Notice .....................................16
   Section 7.  Waiver of Notice ............................................16
   Section 8.  Annual Statement ............................................16

ARTICLE VII - Amendments ...................................................16

   Section 1.  Amendment by Directors ......................................16
   Section 2.  Amendment by Stockholders ...................................17
</Table>


                                       iii
<PAGE>

                                     BYLAWS
                                       OF
                            BAKER HUGHES INCORPORATED

                                    ARTICLE I

                                     Offices


         Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.

         Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the Corporation may require.

                                   ARTICLE II

                            Meetings of Stockholders

         Section 1. All meetings of the stockholders shall be held at such place
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting.

         Section 2. An annual meeting of stockholders shall be held on the
fourth Wednesday in April in each year, if not a legal holiday, and if a legal
holiday, then on the next business day following, at 11:00 a.m. or at such other
date and time as may be determined from time to time by resolution adopted by
the Board of Directors, for the purpose of electing, subject to Article III,
Section 2 hereof, one class of the directors of the Corporation, and transacting
such other business as may properly be brought before the meeting.

         Section 3. A majority of the stock issued and outstanding and entitled
to vote at any meeting of stockholders, the holders of which are present in
person or represented by proxy, without regard to class or series, shall
constitute a quorum for the transaction of business except as otherwise provided
by law, by the Certificate of Incorporation, or by these Bylaws. A quorum, once
established, shall not be broken by the withdrawal of enough votes to leave less
than a quorum and the votes present may continue to transact business until
adjournment provided that any action taken (other than adjournment) is approved
by at least a majority of the shares required to constitute a quorum. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, a majority of the voting stock represented in person or by proxy
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote thereat.


                                       1
<PAGE>


         Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
the Certificate of Incorporation or these Bylaws, a different vote is required
in which case such express provision shall govern and control the decision of
such question.

         Section 5. At each meeting of the stockholders, each stockholder having
the right to vote may vote in person or may authorize another person or persons
to act for him by proxy appointed by an instrument in writing subscribed by such
stockholder and bearing a date not more than three years prior to said meeting,
unless said instrument provides for a longer period. All proxies must be filed
with the Secretary of the Corporation at the beginning of each meeting in order
to be counted in any vote at the meeting. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
telegraphic transmission or otherwise) by the stockholder or the stockholder's
attorney in fact. Each stockholder shall have one vote for each share of stock
having voting power, registered in his name on the books of the Corporation on
the record date set by the Board of Directors as provided in Article V, Section
6 hereof.

         Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called at any time by the Board of Directors or by a
committee of the Board of Directors which has been duly designated by the Board
of Directors and whose powers and authority, as provided in a resolution of the
Board of Directors or in these Bylaws, include the power to call such meetings.
Special meetings of stockholders of the Corporation may not be called by any
other person or persons. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.

         Section 7. Any notice requested to be given to stockholders by statute,
the Certificate of Incorporation or these Bylaws, including notice of any
meeting of stockholders, shall be given personally, by first-class mail or by
telegraphic communication, charges prepaid, addressed to the stockholder at the
address of such stockholder appearing on the books of the Corporation or given
by the stockholder to the Corporation for the purpose of notice. If no such
address appears on the Corporation's books or has been so given, notice shall be
deemed to have been given if sent by first-class mail or telegraphic
communication to the Corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where such
principal executive office is located. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram.

         If any notice addressed to a stockholder at the address of such
stockholder appearing on the books of a Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at such address, all further notices shall be deemed to have been duly given
without further mailing if the same shall be available to the stockholder upon
written demand of the stockholder at the principal executive office of the
Corporation for a period of one year from the date of the giving of such notice.

         Section 8. Attendance of a person at a meeting shall constitute a
waiver of notice to such person of such meeting, except when the person objects
at the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened, or objects to the consideration of
matters not included in the notice of the meeting.


                                       2
<PAGE>

         Section 9. The officer or agent who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where their
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept open at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present. The stock ledger of the Corporation shall be the only evidence
as to who are the stockholders entitled to examine such list or to vote at any
meetings of stockholders.

         Section 10. No action shall be taken by stockholders except at an
annual or special meeting of stockholders, and stockholders may not act by
written consent.

         Section 11. Before any meeting of stockholders, the Board of Directors
may appoint any persons other than nominees for office to act as inspectors of
election at the meeting or its adjournment. If no inspectors of election are so
appointed, the chairman of the meeting may, and on the request of any
stockholder or a stockholder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one or three. If
inspectors are appointed at a meeting on the request of one or more stockholders
or proxies, the holders of a majority of shares or their proxies present at the
meeting shall determine whether one or three inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
the chairman of the meeting may, and upon the request of any stockholder or a
stockholder's proxy shall, appoint a person to fill such vacancy.

         The duties of these inspectors shall be as follows:

                  (a) Determine the number of shares outstanding and the voting
         power of each, the shares represented at the meeting, the existence of
         a quorum, and the authenticity, validity and effect of proxies;

                  (b) Receive votes or ballots;

                  (c) Hear and determine all challenges and questions in any way
         arising in connection with the right to vote;

                  (d) Count and tabulate all votes;

                  (e) Determine when the polls shall close;

                  (f) Determine the results; and

                  (g) Do any other acts that may be proper to conduct the
         election or vote with fairness to all stockholders.


                                       3
<PAGE>

         Section 12. Meetings of the stockholders shall be presided over by the
Chairman of the Board of Directors, or in his absence, by the Vice Chairman, the
President or by any Vice President, or, in the absence of any of such officers,
by a chairman to be chosen by a majority of the stockholders entitled to vote at
the meeting who are present in person or by proxy. The Secretary, or, in his
absence, any person appointed by the chairman, shall act as secretary of all
meetings of the stockholders.

         Section 13. The order of business at all meetings of stockholders shall
be as determined by the chairman of the meeting.

         Section 14. Notwithstanding anything in these Bylaws to the contrary,
no business shall be conducted at an annual meeting of the stockholders except
in accordance with the procedures hereinafter set forth in this Section 14;
provided, however, that nothing in this Section 14 shall be deemed to preclude
discussion by any stockholder of any business properly brought before the annual
meeting in accordance with said procedures.

         At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (1) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the
Board, (2) otherwise properly brought before the meeting by or at the direction
of the Board, or (3) otherwise properly brought before the meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
one hundred twenty (120) days in advance of the first annual anniversary of the
date of the Corporation's proxy statement released to stockholders in connection
with the previous year's annual meeting of stockholders, except that if no
annual meeting was held in the previous year or the date of the annual meeting
has been changed by more than thirty (30) calendar days from the date
contemplated at the time of the previous year's proxy statement, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made. Any
adjournment(s) or postponement(s) of the original meeting whereby the meeting
will reconvene within 30 days from the original date shall be deemed for
purposes of notice to be a continuation of the original meeting and no business
may be brought before any such reconvened meeting unless timely notice of such
business was given to the Secretary of the Corporation for the meeting as
originally scheduled. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting and their reasons for conducting such business at the annual meeting,
(ii) the name and record address of the stockholder proposing such business,
(iii) the class and number of shares of the Corporation which are beneficially
owned by the stockholders, and (iv) any material interest of the stockholder in
such business.

         The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 14, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.


                                       4
<PAGE>

         Section 15. Notwithstanding anything in these Bylaws to the contrary,
only persons who are nominated in accordance with the procedures hereinafter set
forth in this Section 15 shall be eligible for election as directors of the
Corporation.

         Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders only (1) by or at the
direction of the Board of Directors or (2) by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 15. Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 120 days, nor
more than 150 days, in advance of the first annual anniversary of the date of
the Corporation's proxy statement released to stockholders in connection with
the previous year's annual meeting of stockholders, except that if no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than 30 calendar days from the date contemplated at the time of
the previous year's proxy statement, notice by the stockholder to be timely must
be so received not later than the close of business on the tenth day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure was made. Any adjournment(s) or postponement(s) of the
original meeting whereby the meeting will reconvene within thirty (30) days from
the original date shall be deemed for purposes of notice to be a continuation of
the original meeting and no nominations by a shareholder of persons to be
elected directors of the Corporation may be made at any such reconvened meeting
other than pursuant to a notice that was timely for the meeting on the date
originally scheduled. Such stockholder's notice shall set forth: (i) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended, or any successor regulation thereto (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); and (ii) as to the stockholder giving
notice (A) the name and address, as they appear on the Corporation's books, of
such stockholder, and (B) the class and number of shares of the Corporation
which are beneficially owned by such stockholder. At the request of the Board of
Directors, any person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee.

         The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by this Section 15, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.

                                   ARTICLE III

                                    Directors

         Section 1. The Board of Directors shall consist of a minimum of nine
(9) and a maximum of twelve (12) directors. The number of directors shall be
fixed from time to time within the minimum and the maximum number established by
the then elected Board of Directors. The number of directors until changed by
the Board shall be twelve (12). The maximum number of directors may not be
increased by the Board of Directors


                                       5
<PAGE>
to exceed sixteen without the affirmative vote of 75% of the members of the
entire Board. The directors need not be stockholders. No officer of the
Corporation may serve on a board of directors of any company having a present or
retired employee on the Corporation's Board of Directors. No person may stand
for election as a director if within the previous one (1) year he has resigned
from the Board as a result of the tenure provisions of Article III, Section 3
hereof regarding service for more than ten (10), eleven (11) or twelve (12)
consecutive years on the Board. No person associated with an organization whose
services are contracted by the Corporation shall serve on the Corporation's
Board of Directors; provided, however, that this prohibition may be waived by a
majority of the members of the whole Board if the Board in its judgment
determines that such waiver would be in the best interest of the Corporation.

         Section 2. The Board of Directors shall be divided into three classes,
Class I, Class II and Class III. The number of directors in each class shall be
the whole number contained in the quotient arrived at by dividing the authorized
number of directors by three, and if a fraction is also contained in such
quotient then if such fraction is one-third (1/3), the extra director shall be a
member of Class III, and if the fraction is two-thirds (2/3), one of the extra
directors shall be a member of Class III and the other a member of Class II.
Each director shall serve for a term ending on the date of the third annual
meeting following the annual meeting at which such director was elected;
provided, however, that the directors initially appointed to Class I shall serve
for a term ending on the date of the first annual meeting next following
September 30, 1988, the directors initially appointed to Class II shall serve
for a term ending on the date of the second annual meeting next following
September 30, 1988, and the directors initially appointed to Class III shall
serve for a term ending on the date of the third annual meeting next following
September 30, 1988. One class of the directors shall be elected at each annual
meeting of the stockholders. If any such annual meeting is not held or the
directors are not elected thereat, the directors may be elected at any special
meeting of stockholders held for that purpose. All directors shall hold office
until their respective successors are elected and qualified or until their
earlier death, resignation or removal.

         Section 3. Directors who are employees of the Corporation must resign
from the Board of Directors at the time of any diminution in their duties or
responsibilities as an officer, at the time they leave the employ of the
Corporation for any reason or on their 70th birthday. A director's term of
office shall automatically terminate on the date of the annual meeting of
stockholders following: (i) his seventieth (70th) birthday; (ii) the third
anniversary of his retirement from his principal occupation; (iii) unless he is
an officer of the Corporation, the date on which he has served on the
Corporation's Board of Directors a total of ten (10) complete years; (iv) any
fiscal year in which he has failed to attend at least sixty-six percent (66%) of
the meetings of the Board of Directors and any committees of the Board of
Directors on which such director serves; or (v) the first anniversary of any
change in his employment (other than a promotion or lateral movement within the
same organization). The above requirements of Section 3 of Article III may be
waived by a majority of the members of the whole Board (excluding the director
whose resignation would otherwise be required) if the Board in its judgment
determines that such waiver would be in the best interest of the Corporation.
Any director may be removed for cause by the holders of a majority of the shares
of the Corporation entitled to vote in the election of directors; stockholders
may not remove any director without cause. The Board of Directors may not remove
any director for or without cause, and no recommendation by the Board of
Directors that a director be removed for cause may be made to the stockholders
except by the affirmative vote of not less than seventy-five percent (75%) of
the members of the whole Board; provided that


                                       6
<PAGE>
the Board may remove any director who fails to resign as required by the
provisions of these Bylaws.

         Section 4. Except as otherwise provided by statute or the Certificate
of Incorporation, in the case of any increase in the number of directors, such
additional director or directors shall be proposed for election to terms of
office that will most nearly result in each class of directors containing
one-third (1/3) of the entire number of members of the whole Board, and, unless
such position is to be filled by a vote of the stockholders at an annual or
special meeting, shall be elected by a majority vote of the directors in such
class or classes, voting separately by class. In the case of any vacancy in the
Board of Directors, however created, the vacancy or vacancies shall be filled by
majority vote of the directors remaining in the class in which the vacancy
occurs or, if only one such director remains, by such director. In the event one
or more directors shall resign, effective at a future date, such vacancy or
vacancies shall be filled as provided herein. Directors so chosen or elected
shall hold office for the remaining term of the directorship to which appointed.
Any director elected or chosen as provided herein shall serve for the unexpired
term of office or until his successor is elected and qualified or until his
earlier death, resignation or removal.

         In the event of any decrease in the authorized number of directors, (a)
each director then serving as such shall nevertheless continue as a director of
the class of which he is a member until the expiration of this current term, or
his prior death, resignation or removal, and (b) the newly eliminated
directorships resulting from such decrease shall be apportioned by the Board of
Directors to such class or classes as shall, so far as possible, bring the
number of directors in the respective classes into conformity with the formula
in Section 2 hereof as applied to the newly authorized number of directors.

         Section 5. The property and business of the Corporation shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these Bylaws expressly conferred upon them, the Board
may exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute, by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.

                       Meetings of the Board of Directors

         Section 6. The directors may hold their meetings and have one or more
offices, and keep the books of the Corporation outside the State of Delaware.

         Section 7. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board. Except as otherwise provided by statute, any business may be
transacted at any regular meeting of the Board of Directors.

         Section 8. Special meetings of the Board of Directors may be called by
the Chairman of the Board, the Vice Chairman or the President on at least
twenty-four hours' notice, or such shorter period as the person calling deems
appropriate, to each director. Special meetings shall be called by the President
or the Secretary in like manner and on like notice on the written request of any
two directors unless the Board consists of only one director, in which case
special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of the sole director.


                                       7
<PAGE>

         Section 9. At all meetings of the Board of Directors a majority of the
authorized number of directors shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the vote of a majority of the
directors present at any meeting at which there is a quorum, shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute, by the Certificate of Incorporation or by these Bylaws. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present. If only one
director is authorized, such sole director shall constitute a quorum. A meeting
at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action is approved by at
least a majority of the required quorum for such meeting.

         Section 10. Unless otherwise restricted by statute, the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.

         Section 11. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
a meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.

                             Committees of Directors

         Section 12. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each such
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. If no alternate members have been appointed, the committee member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any absent or
disqualified member. The Board of Directors shall, by resolution passed by a
majority of the whole Board, designate one member of each committee as chairman
of such committee. Each such chairman shall hold such office for a period not in
excess of five years, and shall upon surrender of such chairmanship resign from
membership on such committee. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, but no such committee shall have the power or
authority to authorize an amendment to the Certificate of Incorporation (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors,
fix the designations and any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the Corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation, or fix the number or shares
of any series of stock or authorize the increase or decrease of the shares of
any series), adopt an agreement of


                                       8
<PAGE>
merger or consolidation, recommend to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommend to the stockholders a dissolution of the Corporation or a revocation
of a dissolution, or amend the Bylaws of the Corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend, to authorize
the issuance of stock or to adopt a certificate of ownership and merger.

         Section 13. Special meetings of committees may be called by the
Chairman of such committee, the Chairman of the Board or the President, on at
least twenty-four (24) hours' notice, or such shorter period as the person
calling deems appropriate, to each member. Alternate members shall have the
right to attend all meetings of the committee. The Board of Directors may adopt
rules of the government of any committee not inconsistent with the provisions of
these Bylaws. If a committee is comprised of an odd number of members, a quorum
shall consist of a majority of that number. If the committee is comprised of an
even number of members, a quorum shall consist of one-half (1/2) of that number.
If a committee is comprised of two members, a quorum shall consist of both
members.

         Section 14. Each Committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when requested.

                            Compensation of Directors

         Section 15. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.

                                 Indemnification

         Section 16. (a) The Corporation shall indemnify every person who is or
was a party or is or was threatened to be made a party to any threatened,
pending or completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was a director, officer or
employee of the Corporation or any of its direct or indirect wholly-owned
subsidiaries or, while a director, officer or employee of the Corporation or any
of its direct or indirect wholly-owned subsidiaries, is or was serving at the
request of the Corporation or any of its direct or indirect wholly-owned
subsidiaries, as a director, officer or employee, of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including counsel fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, to the full extent permitted by applicable law;
provided that the Corporation shall not be obligated to indemnify any such
person against any such action, suit or proceeding which is brought by such
person against the Corporation or any of its direct or indirect wholly-owned
subsidiaries or the directors of the Corporation or any of its direct or
indirect wholly-owned subsidiaries, other than an action brought by such person
to enforce his rights to indemnification hereunder, unless a


                                       9
<PAGE>
majority of the Board of Directors of the Corporation shall have previously
approved the bringing of such action, suit or proceeding, and provided further
that the Corporation shall not be obligated to indemnify any such person against
any action, suit or proceeding arising out of any adjudicated criminal,
dishonest or fraudulent acts, errors or omissions of such person or any
adjudicated willful, intentional or malicious acts, errors or omissions of such
person.

         (b) The Corporation shall indemnify every person who is or was a party
or is or was threatened to be made a party to any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was licensed to practice
law and an employee (including an employee who is or was an officer) of the
Corporation or any of its direct or indirect wholly-owned subsidiaries and,
while acting in the course of such employment committed or is alleged to have
committed any negligent acts, errors or omissions in rendering professional
legal services at the request of the Corporation or pursuant to his employment
(including, without limitation, rendering written or oral legal opinions to
third parties) against expenses (including counsel fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding, to the full extent permitted by applicable
law; provided that the Corporation shall not be obligated to indemnify any such
person against any action, suit or proceeding arising out of any adjudicated
criminal, dishonest or fraudulent acts, errors or omissions of such person or
any adjudicated willful, intentional or malicious acts, errors or omissions of
such person.

         (c) The Corporation shall indemnify every person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, or
employee of the Corporation, or any of its direct or indirect wholly-owned
subsidiaries or, while a director, officer, or employee of the Corporation or
any of its direct or indirect wholly-owned subsidiaries, is or was serving at
the request of the Corporation or any of its direct or indirect wholly-owned
subsidiaries, as a director, officer, or employee of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.

         (d) To the extent that a director, officer, or employee of the
Corporation, or any of its direct or indirect wholly-owned subsidiaries, has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a), (b) and (c) of this section, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.

         (e) Any indemnification under subsections (a), (b) and (c) of this
section (unless ordered by a court) shall be made by the Corporation only as
authorized in the


                                       10
<PAGE>
specific case upon a determination that indemnification of the director,
officer, or employee is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a), (b) and (c) of this
section. Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.

         (f) Expenses (including attorneys' fees) incurred by an officer or
director of the Corporation or any of its direct or indirect wholly-owned
subsidiaries in defending a civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Section 16. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board of Directors deems appropriate.

         (g) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 16 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any provision of law, the Corporation's Certificate of
Incorporation, the Certificate of Incorporation or Bylaws or other governing
documents of any direct or indirect wholly-owned subsidiary of the Corporation,
or any agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding any of the positions or having any of the relationships referred
to in this Section 16.

         (h) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 16 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer or employee and shall inure to the benefit of the heirs, executors and
administrators of such a person.

                                   ARTICLE IV

                                    Officers

         Section 1. The officers of the Corporation shall be a Chairman of the
Board, a Vice Chairman of the Board, a President, a Chief Financial Officer, a
Vice President, a Secretary, a Treasurer and a Controller. The Corporation may
also have, at the discretion of the Board of Directors, one or more additional
Vice Presidents, and such other officers as may be appointed in accordance with
the provisions of Section 3 of this Article.

         Section 2. The officers of the Corporation, except such officers as may
be appointed in accordance with the provisions of Section 3 or Section 5 of this
Article, shall be chosen by the Board of Directors, and each shall serve at the
pleasure of the Board, subject to the rights, if any, of any officer under any
contract of employment.

         Section 3. The Board of Directors may appoint, and may empower the
President to appoint, such other officers as the business of the Corporation may
require, each of whom shall hold office for such period, have such authority and
perform such duties as are provided in the Bylaws or as the Board of Directors
may from time to time determine.


                                       11
<PAGE>

         Section 4. Any officer may be removed, either with or without cause, by
the Board of Directors, at any regular or special meeting thereof, or except in
case of an officer chosen by the Board of Directors, by any officer upon whom
such power of removal may be conferred by the Board of Directors, provided that
such removal shall not prejudice the remedy of such officer for breach of any
contract of employment.

         Any officer may resign at any time by giving written notice to the
Corporation. Any such resignation shall take effect on receipt of such notice or
at any later time specified therein. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. Any
such resignation is without prejudice to the rights, if any, of the Corporation
under any contract to which the officer is a party.

         Section 5. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in these Bylaws for regular appointments to such office.

         Section 6. The Chairman of the Board shall, if present, preside at all
meetings of the Board of Directors and of the stockholders, and shall exercise
and perform such other powers and duties as may be from time to time assigned to
him by the Board of Directors or prescribed by the Bylaws.

         Section 7. The Vice Chairman of the Board shall exercise and perform
such powers and duties as may be from time to time assigned to him by the Board
of Directors or prescribed in these Bylaws. In the absence of the Chairman of
the Board, the Vice Chairman of the Board shall preside at all meetings of the
stockholders and the Board of Directors.

         Section 8. The President shall be the chief executive officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the Corporation. In the absence of the Chairman of the Board and the Vice
Chairman of the Board, the President shall preside at all meetings of the
stockholders and the Board of Directors. He shall have the general powers and
duties of management usually vested in the office of President of a corporation,
and shall have such other powers and duties as may be prescribed by the Board of
Directors or the Bylaws.

         Section 9. In the absence or disability of the President, the Vice
Presidents, if any, in order of their rank as fixed by the Board of Directors,
or if not ranked, the Vice President designated by the President, shall perform
all the duties of the President, and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors,
these Bylaws or the President.

         Section 10. The Secretary shall keep or cause to be kept, at the
principal office or such other place as the Board of Directors may order, a book
of minutes of all meetings and actions of directors, committees of directors and
stockholders, with the time and place of holding, whether regular or special,
and, if special, how authorized, the notice thereof given, the names of those
present at directors' and committee meetings, the number of shares present or
represented at stockholders' meetings, and the proceedings thereof.


                                       12
<PAGE>

         The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the Corporation's transfer agent or registrar, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.

         The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the Corporation, if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the Bylaws.

         Section 11. The Chief Financial Officer shall keep and maintain, or
cause to be kept and maintained, adequate and correct books and records of
accounts of the properties and business transactions of the Corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings and shares. The books of account shall be
open at all times to inspection by any director.

         The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, shall
render to the President and Directors, whenever they request it, an account of
all of his transactions as Chief Financial Officer and of the financial
condition of the Corporation, and shall have other powers and perform such other
duties as may be prescribed by the Board of Directors or the Bylaws.

         Section 12. The Treasurer and the Controller shall each have such
powers and perform such duties as from time to time may be prescribed for him by
the Board of Directors, the President or these Bylaws.

                                    ARTICLE V

                              Certificate of Stock

         Section 1. Shares of the stock of the Corporation may be represented by
certificates or uncertificated. Owners of shares of the stock of the Corporation
shall be recorded in the share register of the Corporation, and ownership of
such shares shall be evidenced by a certificate or book-entry notation in the
share register of the Corporation. Any certificates representing such shares
shall be signed by, or in the name of the Corporation by, the Chairman or Vice
Chairman of the Board of Directors, or the President or a Vice President, and by
the Secretary or any Assistant Secretary, if one be appointed, or the Treasurer
or an Assistant Treasurer of the Corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the Corporation.

         Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.


                                       13
<PAGE>

         Section 3. If the Corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided by statute, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.

                     Lost, Stolen or Destroyed Certificates

         Section 4. The Board of Directors, the Secretary and the Treasurer each
may direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the owner of such certificate, or his legal representative. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to furnish the Corporation a bond in such form and
substance and with such surety as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.

                               Transfers of Stock

         Section 5. Upon surrender to the Corporation, or the transfer agent of
the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate or other evidence of such
new shares to the person entitled thereto, cancel the old certificate and record
the transaction upon its books. Uncertificated shares shall be transferred in
the share register of the Corporation upon the written instruction originated by
the appropriate person to transfer the shares.

                               Fixing Record Date

         Section 6. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of the stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.


                                       14
<PAGE>
                             Registered Stockholder

         Section 7. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.


                                   ARTICLE VI

                               General Provisions

                                    Dividends

         Section 1. Dividends upon the capital stock of the Corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property or in shares of the Corporation's
capital stock, subject to the provisions of the Certificate of Incorporation.

         Section 2. Before declaration of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the Board of Directors from time to time, in its absolute discretion, thinks
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the Board of Directors shall think conducive to the interests of the
Corporation, and the Board of Directors may thereafter abolish any such reserve
in its absolute discretion.

                                     Checks

         Section 3. All checks, drafts or other orders for payment of money,
notes or other evidences of indebtedness, issued in the name of or payable to
the Corporation shall be signed by such officer or officers as the Board of
Directors or the President or any Vice President, acting jointly, may from time
to time designate.

         Section 4. The President, any Vice President, the Secretary or the
Treasurer may enter into contracts and execute instruments on behalf of the
Corporation. The Board of Directors, the President or any Vice President may
authorize any officer or officers, and any employee or employees or agent or
agents of the Corporation or any of its subsidiaries, to enter into any contract
or execute any instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances.

                                   Fiscal Year

         Section 5. The fiscal year of the Corporation shall be January 1
through December 31, unless otherwise fixed by resolution of the Board of
Directors.


                                       15
<PAGE>
                                     Notices

         Section 6. Whenever, under the provisions of the statutes, the
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director, it shall not be construed to require personal notice, but such
notice may be given in writing, by mail, addressed to such director, at his
address as it appears on the records of the Corporation (unless prior to mailing
of such notice he shall have filed with the Secretary a written request that
notices intended for him be mailed to some other address, in which case such
notice shall be mailed to the address designated in the request) with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail; provided, however, that,
in the case of notice of a special meeting of the Board of Directors, if such
meeting is to be held within seven calendar days after the date of such notice,
notice shall be deemed given as of the date such notice shall be accepted for
delivery by a courier service that provides "opening of business next day"
delivery, so long as at least one attempt shall have been made, on or before the
date such notice is accepted for delivery by such courier service, to provide
notice by telephone to each director at his principal place of business and at
his principal residence. Notice to directors may also be given by telegram, by
personal delivery, by telephone or by facsimile.

         Section 7. Whenever any notice is required to be given under the
provisions of the statutes, the Certificate of Incorporation or these Bylaws, a
waiver thereof in writing, or by telegraph, cable or other written form of
recorded communication, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.

                                Annual Statement

         Section 8. The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.

                                   ARTICLE VII

                                   Amendments

         Section 1. Except any amendment to this Article VII and to Article II,
Section 6, Article II, Section 10, Article III, Section 1 (as it relates to
increases in the number of directors), Article III, Section 2, the last sentence
of Article III, Section 3 (as it relates to removal of directors), Article III,
Section 4, Article III, Section 16 and Article VI, Section 6 of these Bylaws, or
any of such provisions, which shall require approval by the affirmative vote of
directors representing at least seventy-five percent (75%) of the number of
directors provided for in accordance with Article III, Section 1, and except as
otherwise expressly provided in a bylaw adopted by the stockholders as
hereinafter provided, the directors, by the affirmative vote of a majority of
the whole Board and without the assent or vote of the stockholders, may at any
meeting, make, repeal, alter, amend or rescind any of these Bylaws, provided the
substance of the proposed amendment or other action shall have been stated in a
notice of the meeting.


                                       16
<PAGE>

         Section 2. These Bylaws may not be altered, amended or rescinded, and
new Bylaws may not be adopted, by the stockholders of the Corporation except by
the vote of the holders of not less than seventy-five percent (75%) of the total
voting power of all shares of stock of the Corporation entitled to vote in the
election of directors, considered for such purpose as one class.


                                       17

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